Related papers: Binary markets under transaction costs
In this work we consider three problems of the standard market approach to pricing of credit index options: the definition of the index spread is not valid in general, the usually considered payoff leads to a pricing which is not always…
This paper investigates the optimal investment problem in a market with two types of illiquidity: transaction costs and search frictions. Extending the framework established by arXiv:2101.09936, we analyze a power-utility maximization…
The research presented in this work is motivated by recent papers by Brigo et al. (2011), Burgard and Kjaer (2009), Cr\'epey (2012), Fujii and Takahashi (2010), Piterbarg (2010) and Pallavicini et al. (2012). Our goal is to provide a sound…
This study investigates the prevention of market manipulation using a price-impact model of financial market trading as a linear system. First, I define a trading game between speculators such that they implement a manipulation trading…
Automated Market Makers (AMMs) are a central component of decentralized exchanges, yet their equilibrium foundations and microeconomic mechanisms remain incompletely understood. This paper develops a dynamic equilibrium framework for…
We reconsider the problem of optimal trading in the presence of linear and quadratic costs, for arbitrary linear costs but in the limit where quadratic costs are small. Using matched asymptotic expansion techniques, we find that the trading…
We show that with suitable restrictions on allowable trading strategies, one has no arbitrage in settings where the traditional theory would admit arbitrage possibilities. In particular, price processes that are not semimartingales are…
The programmable and composable nature of smart contract protocols has enabled the emergence of novel market structures and asset classes that are architecturally frictional to implement in traditional financial paradigms. This fluidity has…
We design a novel calibration procedure that is designed to handle the specific characteristics of options on cryptocurrency markets, namely large bid-ask spreads and the possibility of missing or incoherent prices in the considered data…
Price benchmarks are used to incorporate market price trends into contracts, but their use can create opportunities for manipulation by parties involved in the contract. This paper examines this issue using a realistic and tractable model…
A market with asymmetric information can be viewed as a repeated exchange game between the informed sector and the uninformed one. In a market with risk-neutral agents, De Meyer [2010] proves that the price process should be a particular…
The classical theory of efficient allocations of an aggregate endowment in a pure-exchange economy has hitherto primarily focused on the Pareto-efficiency of allocations, under the implicit assumption that transfers between agents are…
This paper studies the utility maximization on the terminal wealth with random endowments and proportional transaction costs. To deal with unbounded random payoffs from some illiquid claims, we propose to work with the acceptable portfolios…
This paper studies the optimal consumption under the addictive habit formation preference in markets with transaction costs and unbounded random endowments. To model the proportional transaction costs, we adopt the Kabanov's multi-asset…
A market model with $d$ assets in discrete time is considered where trades are subject to proportional transaction costs given via bid-ask spreads, while the existence of a num\`eraire is not assumed. It is shown that robust no arbitrage…
We study optimal execution in markets with transient price impact in a competitive setting with $N$ traders. Motivated by prior negative results on the existence of pure Nash equilibria, we consider randomized strategies for the traders and…
We study $N$-player optimal execution games in an Obizhaeva--Wang model of transient price impact. When the game is regularized by an instantaneous cost on the trading rate, a unique equilibrium exists and we derive its closed form. Whereas…
The problem of investing into a cryptocurrency market requires good understanding of the processes that regulate the price of the currency. In this paper we offer a view of a cryptocurrency market as an environment for realization of a…
In this paper I empirically investigate prediction markets for binary options. Advocates of prediction markets have suggested that asset prices are consistent estimators of the "true" probability of a state of the world being realized. I…
We present an arbitrage free theoretical framework for modeling bid and ask prices of dividend paying securities in a discrete time setup using theory of dynamic acceptability indices. In the first part of the paper we develop the theory of…